City banks that pay out lavish bonuses for short-term profits will be forced to set aside a bigger cash cushion against losses, Alistair Darling will announce this week, as he sets out the government's plans to crack down on the practices that led to the credit crunch.

With the darkest days of the financial crisis apparently over, bankers in the Square Mile have quietly begun to use the phrase "BAB", or "bonuses are back," to signal their hope that the era of outsize pay packets is returning. US bank Goldman Sachs is expected to pay out the biggest bonuses in its history this year, on the back of bumper profits.

But government ministers have stepped up their rhetoric against the City's bonus culture in recent days, with Lord Myners railing against "weak and lazy" remuneration committees that wave through generous payouts.

As part of measures to re-regulate the banking sector, due to be announced on Wednesday, the chancellor will tell the Financial Services Authority that it must treat banks that pay out large cash bonuses on the basis of short-term targets as riskier than their rivals, and force them to hold more capital.

The FSA has already announced a code of practice for remuneration in financial firms, but Treasury sources said the regulator will be urged to give the new rules teeth, by cracking down on firms that fail to comply. The chancellor would also like to see more use of "clawback" clauses, which allow banks to call in bonuses if a trader's bets turn sour.

Darling is keen to strike a tough pose on bankers' pay, after it was revealed that the boss of part-nationalised RBS, Stephen Hester, could take home up to £15m if he meets share-price targets. Hester agreed to defer part of the payout for another two years, to 2014, after the deal sparked public outrage.

Vince Cable, the Liberal Democrat Treasury spokesman, said that insisting bonuses are paid in shares instead of cash was not enough. "Traders are doing that anyway, because the shares are cheap, and capital gains tax is only 18%," he said.

The chancellor's plans for cleaning up the City have already sparked a turf war between the government and the Bank of England, with governor Mervyn King complaining last month that, without more powers to intervene in risky financial institutions, "the Bank finds itself in a position like that of a church whose congregation attends weddings and burials but ignores the sermons in between".

Instead of handing King more control, however, the chancellor will suggest beefing up the Bank's quarterly Financial Stability Review, which identified some of the weaknesses in the banking sector before the credit crunch.

Whitehall officials have been discussing whether the Bank should in future publish recommendations alongside its analysis, and the FSA and the Treasury then be forced to adopt them or explain why they have decided not to.

This week's white paper is expected to reject some of the most radical proposals for preventing a future banking crisis, such as splitting large international banks into riskier "casino" arms and standard high street lenders, with only the latter carrying a state guarantee.